Barclays slashes S&P 500 target to Street low amid global trade war fears

Barclays cut its 2025 S&P 500 target on Tuesday, bringing it down from 6,600 to 5,900, the lowest prediction among major Wall Street firms.

The move reflects the bank’s concern that rising global trade tensions, especially those driven by new U.S. tariffs, will hurt corporate earnings and stall growth across sectors. The new figure implies barely 0.3% upside from the index’s starting point this year.

The downgrade came from Venu Krishna, Barclays’ head of U.S. equity strategy. His note, shared through CNBC, points to worsening trade friction under President Donald Trump’s second term. Krishna said the U.S. is already applying new tariffs on products from Canada, Mexico, and China, and that Trump’s administration will roll out more “reciprocal tariffs” on other countries in early April.

Barclays sees tariffs slowing earnings and growth

Krishna explained that his base scenario assumes “earnings take a hit” as higher tariffs remain in place without getting worse, while reciprocal tariffs on the rest of the world sit at about 5%. He said this would cause a major slowdown in U.S. economic activity, but not a full recession. He placed a 60% chance on this outcome and said it’s already weighing on the S&P 500 outlook.

He added that the final scope and severity of tariffs will directly affect earnings forecasts. In the bull case, Krishna said the White House could back off tariff plans if pressure from industries and political groups grows. That, he wrote, would ease the drag on growth and let the S&P 500 retest last year’s valuation highs, potentially reaching 6,700. He gave that a 25% probability.

But Krishna’s bear case is where things get ugly. If tariffs from Canada, Mexico, and China all hit at once, along with the new reciprocal levies, the index could fall hard. He said this scenario would cause a sharp drop in corporate profits and lead to a contraction in U.S. GDP. That, in turn, could push the S&P 500 into a bear market, down to 4,400. That’s a 25.2% drop from where the index began 2025. He assigned this outcome a 15% probability.

The S&P 500 already looks shaky. After peaking at an all-time intraday high of 6,147.43 in February, the index slid 3% in the past month and briefly fell into correction territory, trading more than 10% below its peak before recovering slightly.

Investors fear recession as data, sentiment break down

Market volatility has been amplified by mixed signals in both hard and soft economic data. On Tuesday, the U.S. consumer confidence index showed Americans’ expectations for income, jobs, and business dropped to a 12-year low. That data point came ahead of more reports expected later in the week, including February’s durable goods orders and the 30-year fixed mortgage rate.

Investors are also watching for the release of the Personal Consumption Expenditures Index, the Federal Reserve’s preferred measure of inflation, due Friday. Traders are using that number to gauge how much pressure remains on prices and how close the economy is to slowing down.

Meanwhile, U.S. Treasury yields edged higher on Wednesday morning. The 10-year yield moved up more than 2 basis points to 4.336%, while the 2-year rose 2.6 basis points to 4.01%. These small gains reflect growing expectations that recession risks are climbing.

Barclays isn’t alone in sounding the alarm. The latest CFO Council Survey from CNBC showed that 60% of chief financial officers now expect a recession in the second half of 2025. An even bigger chunk—75%—said they’re “somewhat pessimistic” about the overall health of the U.S. economy.

The survey also captured frustration over Trump’s economic policies. Corporate leaders described his second-term trade actions as “aggressive” and “disruptive,” with many pointing to sudden tariff decisions as a major cause of instability. Uncertainty around international trade is now one of the biggest risks to business outlooks.

Liquidity shrinks, sectors shuffle, and tech stumbles

At the same time, liquidity in U.S. equity markets is drying up. Krishna said ongoing trade worries are adding to already-thin trading conditions caused by tighter regulations and the rise of algorithmic trading. Institutions are having a harder time making large trades without pushing prices around. This has triggered bigger price swings and more volatility across the board.

Despite the grim headline forecast, Krishna said some sectors might still do well. He upgraded financials to a positive rating and said he favors that space, along with health care and Big Tech, heading into the second quarter. So far this year, financials are up 4.6%, health care has gained 5.6%, and tech is dragging behind—down 7.7% in 2025.

Markets opened quietly on Wednesday after the S&P 500 notched its third straight positive session the day before. Futures tied to the Dow Jones Industrial Average dropped by 19 points, while S&P 500 futures and Nasdaq 100 futures were both down 0.1%.

Still, not everyone believes the weak consumer numbers mean a full-blown recession is here. Paul Hickey, co-founder of Bespoke Investment Group, told CNBC’s “Closing Bell: Overtime” that people are feeling worse than the economy looks on paper.

“The soft data looks terrible,” Hickey said Tuesday. “If you look at the soft data, you’d say we’re in a recession right now — especially after today’s consumer confidence report — but it’s a matter of actions speaking louder than words. When you look at the hard data, we’re not seeing nearly the collapse that we’re seeing in the soft data.”

Hickey said metrics like housing stats, building permits, industrial production, and new home sales have all been either in line with or stronger than expected. He argued that while people may not feel great about the economy, the actual numbers don’t yet show a collapse.

In other market news, GameStop shares jumped 7% in Tuesday’s extended trading. The move followed a decision by its board to invest part of the company’s corporate cash into bitcoin. That puts GameStop on the same path as MicroStrategy, which has famously built up large crypto holdings in recent years.

The announcement didn’t include how much bitcoin GameStop plans to buy or when, but the board said the move was unanimously approved. Investors responded fast, pushing the stock higher after hours.

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